Smoke alarm supplier announces first half loss and points to better H2

COVENTRY-based smoke alarm supplier Sprue Aegis has announced a first half operating loss of £0.9m – but has told shareholders the performance is much better than had been expected.

The firm’s half-year revenue subsided by almost £34m to £25.9m (H1 2015: £56.5m) as a result of a spectacular sales slump in France. The H1 operating profit in 2015 was £9m.

The company had benefited in the run-up to the March 2015 deadline for a least one working smoke alarm to be fitted in every house in France. Following the deadline, the firm was always likely to suffer tough comparables and so it proved.

A tough year for the firm was not helped in April when it was forced to announce that battery problems had reduced the expected lifespan of its products – the announcement included a profit warning that had investors running for the hills and its share price collapsed.

Graham Whitworth, executive chairman, tried to put a positive spin on today’s interims.

He said: “H2 2016 is expected to be a far stronger period than H1 for Sprue with a return to profitability.  Sales are recovering strongly with certified Panasonic battery products now being shipped into Germany.  We are seeing increased levels of customer confidence in the quality of Sprue’s products and sales into Germany in Q3 2016 are now expected to be circa €3m higher than the comparable quarter last year.
 
“The battery impedance issue announced in H1 2016 has been managed as well as could be expected and I am pleased to report that we have not lost any major customers as a result of this issue.  

“Total product returns in the year to date are tracking broadly in line with management’s expectations and of the total £6.8m warranty provisions as at December 31, 2015 – which principally relate to the high impedance battery issue – we utilised £1.1m to cover warranty costs incurred in H1 2016.  The current provision appears adequate to address our future product warranty costs exposure at this stage.”

The gloom has also been lifted slightly by the firm announcing the £2.8m acquisition of the source code and development rights to software developed by Intamac Systems.

The acquisition will enable Sprue’s customers to connect and monitor its whole range of wireless products over the internet.

Using its patent pending technology, Sprue has the ability to use the data it collects from Connected Homes products to not only detect fires, but using an advanced algorithm, to be able to identify properties at elevated risk of experiencing a fire in the future. 

The board said it believed this was a major development for the company as it significantly extended Sprue’s technical capability and provided an opportunity to sell a wide range of internet-enabled products and services as part of its new Connected Home strategy with the potential of recurring revenues. 

In addition, based on expressions of customer interest received already, the board said it was optimistic of commencing sales of internet-enabled products in Q4 2016.
 

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